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Gores Guggenheim Could Be the Next Big EV Play, But Don’t Buy Shares Yet

Recently-announced special purpose acquisition company (SPAC) Gores Guggenheim (NASDAQ:GGPI) has raced higher and has since pulled over for a pit stop…

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This article was originally published by Investor Place

Recently-announced special purpose acquisition company (SPAC) Gores Guggenheim (NASDAQ:GGPI) has raced higher and has since pulled over for a pit stop of sorts. But is now the time for investors to take a test drive and buckle up for the longer road ahead? Or should they steer clear of GGPI stock for the time being?

A close up of a Polestar vehicle in front of a company sign.Source: Jeppe Gustafsson / Shutterstock.com

Lucid Motors (NASDAQ:LCID). QuantumScape (NYSE:QS). Blink Charging (NASDAQ:BLNK). Tesla (NASDAQ:TSLA).They’re all  electric vehicle (EV) stocks. That’s not exactly a secret, of course.

It’s also not guarded knowledge that President Joe Biden’s infrastructure plan has sent more than a few promising EV-related stocks handily higher the past month. And for good reason, too — with an allocation of $7.5 billion for EVs to become standard technology for the masses, it’s big news.

And GGPI, or rather blank-check outfit Gores Guggenheim, is in a strong position to capitalize on momentum within the EV market. This past summer, it announced its merger plans with Sweden’s privately-held Polestar.

The Story Behind the Polestar Merger

If timing is everything, GGPI stock mostly failed to gain any traction worth mentioning from the news. Of course, its inability to rally was hardly of its own making. Unlike today, EVs were uniformly underwater at the time and bucking a very green market tide in value and cyclical stocks.

But you knew that already, right? And those days are in the rearview mirror.

What you may not know or appreciate is Polestar’s and GGPI’s combined pedigree, which sets it apart from most of the EV pack. To steal some background on the merger from InvestorPlace’s Stavros Georgiadis, GGPI is coming into a knife fight against other EV plays with a loaded gun.

In a nutshell, GGPI has a longstanding engineering relationship with Volvo’s racing vehicles that spans a quarter of a century. There’s also Gore’s own tenured history, which brings more than 30 years and more than 120 wheeling and dealings to the table.

Unlike much of the competition, Polestar also already has two limited-edition, high-performance EVs in production: Polestar 1 and Polestar 2.

The vehicles look worthy of making Bullitt’s titular character rethink his ride of choice if the iconic movie was ever remade. Sacrilege to some, but it wouldn’t be out of the question.

Polestar is also committed to launching three new autos by 2024. Gore expects EBIT to break even in 2023, while sales are forecast to climb from $1.6 billion this year to nearly $18 billion by 2025.

GGPI Stock Weekly Price Chart

Gores Guggenheim (GGPI) weekly triangle or inside candlestick consolidation, but weakly-positioned stochastics hints of downside resolution
Source: Charts by TradingView

For any merger, there will always be obstacles which need to be navigated. GGPI and Polestar are no exception.

As Will Ashworth, another InvestorPlace colleague smartly notes, there is now some worry regarding Polestar’s supply chain because of shortages in key chips and lithium batteries. But Ashworth also proffers buying shares, while stressing there’s no particular need to rush right in.

Based on his back-of-a-napkin math, GGPI stock maintains a healthy discount if the deal is approved next year. Shares also offer much more relative value compared to Rivian (NASDAQ:RIVN), the newest EV play on the block.

Technically, and in keeping with Ashworth, the price chart agrees that waiting to buy is the right play. At the moment, shares of GGPI stock are forming an inside candlestick pattern now in its third week of development. The price action also loosely takes on the shape of a symmetrical triangle.

A potential breakout entry aligns itself nicely with a momentum trade. However, the gap between Will’s fair value near $18 per share obviously shrinks with this type of entry.

Also, as it stands, GGPI’s stochastics is warning investors to stay curbside with its bearish crossover in overbought territory.

In the end, the path of least resistance may lead to a steeper and more generous discount-in-the-making for investors who keep a watchful eye on GGPI stock.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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Energy & Critical Metals

US Dept of Energy Looks to Produce More Uranium for Cutting-Edge Nuclear Reactors

The US government is looking to advance the country’s nuclear power capabilities, and with that produce more more high-assay low-enriched
The post US…

The US government is looking to advance the country’s nuclear power capabilities, and with that produce more more high-assay low-enriched uranium fuel in an effort to align with a less carbon-intensive future.

As reported by CNBC, the Department of Energy on Tuesday formally requested additional information regarding intentions to produce large quantities of high-assay low-enriched uranium fuel (HALEU) in order to power a new generation of nuclear reactors. As of current, the National Nuclear Security Administration of the DOE develops just enough uranium to meet the demand of its nonproliferation and defense missions.

However, the latest information-gathering step is necessary for the country’s plans to eventually create cheaper, smaller and more safe nuclear reactors that would be able to meet growing energy demand. “I have long supported the commercialization of advanced nuclear technologies as a zero-emission source of baseload energy,” said Senator Joe Manchin, who, despite being the main Democrat opposing President Joe Biden’s $1.75 trillion spending bill, appears to convey support for the DOE’s latest plans.

“I am pleased that the Department of Energy is moving ahead with this announcement that will lead to a domestic supply of high-assay low enriched uranium in the United States.” added Manchin. Unlike traditional uranium processing, which creates about 5% uranium-135— the particular isotope needed for nuclear fission reactions, HALEU is enriched with about 20% U-235, making it a substantially more efficient fuel.


Information for this briefing was found via CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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Energy & Critical Metals

Why Nio Stock Faces an Uphill Battle

Chinese automaker Nio (NYSE:NIO) has several strengths, including its innovative battery-exchange program, significant sales growth and its pending expansion…

Chinese automaker Nio (NYSE:NIO) has several strengths, including its innovative battery-exchange program, significant sales growth and its pending expansion into multiple overseas markets. Yet, NIO stock is down 50% in the past year.

A Nio (NIO) sign outside of the company's facilities in Shanghai, China.Source: Andy Feng / Shutterstock.com

Maybe that’s because in the past several months, the company’s sales growth and financial results haven’t been all that impressive. Or perhaps it’s because the electric vehicle maker faces extremely tough competition from the likes of Xpeng (NYSE:XPEV), Li Auto (NASDAQ:LI) and Tesla (NASDAQ:TSLA). Nio also seems to be significantly behind a number of its rivals when it comes to autonomous driving.

High Prices and Tough Competition

One thing that could hinder Nio going forward is the relatively high prices of its vehicles. The base prices for Nio’s EV lineup ranges from about $50,000 to roughly $70,000. Add in extras and customization and they can run upward of $80,000.

NIO’s latest model, the ET7, will cost customers about $68,710 and $77,640 depending on what battery pack they pick. And that’s after factoring in EV subsidies from the Chinese government.

For comparison, Xpeng’s after-subsidy base prices range from $23,000 to $36,000, while Tesla’s cheapest Model 3 starts at around $40,000.

Nio also faces a great deal of competition at the higher end of the EV market from some famous and well-regarded brands including BMW (OTC:BMWYY), Audi, Lincoln and Mercedes.

In China, where incomes are generally lower than in the U.S. and Western Europe, less expensive EVs have a much better chance of becoming bestsellers than their more costly peers. In the end, selling millions of EVs with, say, a 20% gross margin will prove more profitable than selling a few hundred thousand vehicles with, say, a 40% gross margin.

Nio Appears To Be Falling Behind in Autonomous Driving

It seems that Nio is well behind Xpeng and Tesla when it comes to autonomous driving. Last month, Barron’s reported: “NIO Autonomous Driving or NAD, as the company calls it, will maintain driving speeds and do some steering, but drivers still need to pay attention to the road at all times.” Doesn’t sound all that “autonomous” to me.

Meanwhile, in October, Xpeng released its Xpilot 3.5 version of its advanced driver-assistance system. “The system allows Xpeng’s cars to change lanes, speed up or slow down, or overtake cars and enter and exit highways,” according to CNBC.

And in November, Tesla started offering its Enhanced Autopilot system in China to some customers. According to Inside EVs, among the features offered by Tesla’s system are “Summon, Autopark, Auto Lane Change, and, most importantly, Navigate on Autopilot.”

You don’t have to be an expert on autonomous vehicles to see that Nio is trailing Xpeng and Tesla in this area by a significant margin.

Disappointing Sales Growth and Financial Results

For December, Nio reported that its deliveries had increased nearly 50% year over year to 10,489 EVs. That’s not terrible, but it was lower than the prior month’s 10,878 deliveries and a marked slowdown from November’s year-over-year growth of 106%.

It also paled in comparison to its competitors’ December growth. XPeng delivered 16,000 vehicles in December, up 181% from a year ago and 2.5% from November. And Li Auto saw its deliveries hit 14,087 in December, up 4.5% over November and 130% year over year.

Nio is expected to report fourth-quarter earnings next month. Management’s most recent guidance, released in November, of $1.46 billion to $1.56 billion fell short of analysts’ estimates of $1.75 billion. The consensus has since lowered its forecast, predicting Nio will earn $1.53 billion. That represents year-over-year growth of 49.5%, while full-year revenue is expected to increase 120% to $5.62 billion.

If the company fails to meet or beat these numbers, NIO stock could sell off sharply.

The Bottom Line on Nio Stock

Nio faces tough competition in the Chinese EV market and appears to be falling behind its competitors in terms of growth. The high price of Nio’s vehicles compared with some of its rivals’ and its relatively slow progress when it comes to self-driving technologies could cost the company its edge.

Shares are currently trading for five times analysts’ average 2022 revenue estimate, which could prove to be overly optimistic. NIO stock isn’t expensive for an EV name, but it isn’t cheap either. And that valuation appears to bake in a meaningful amount of sales growth for the automaker, both at home and overseas.

I recommend investors avoid NIO stock at this point.

On the date of publication, Larry Ramer held a long position in XPEV stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer. 

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Energy & Critical Metals

NIO Has Strong Catalysts Going for It in 2022

Chinese premium electric vehicle (EV) maker Nio (NYSE:NIO) hasn’t had a smooth 2021. NIO stock was once trading at the highs of $60 and is down to $30…

Chinese premium electric vehicle (EV) maker Nio (NYSE:NIO) hasn’t had a smooth 2021. NIO stock was once trading at the highs of $60 and is down to $30 today. Nothing has gone wrong with the company but the overall investor sentiment has led to the sell-off. There are also several concerns associated with Chinese regulations and this has had an impact on NIO stock.

Image showing a Nio store with a glowing logo on the front.Source: Andy Feng/Shutterstock.com

It was trading at $14 in July 2020 and doubled in October 2020. The stock then hit $54 in November 2020 and saw the best days in the early months of 2021. However, the highs didn’t last long and the stock started falling since March 2021. It hit $33 in May and soared to $53 in June 2021 and fell back to the lows of $30 since then.

Nio has consistently impressed investors with the solid quarterly delivery numbers. Despite rising competition, Nio is walking with pride and is on the way to leading the EV industry. I have always been a fan of NIO stock and I am of the opinion that it could hit the all-time high again in 2022.

The company has already started the year on a strong note. With that in mind, let’s consider two reasons to invest in NIO stock.

The Future of the EV Industry Is Bright

The global electric vehicle market is expected to reach $802.81 billion by 2027, at a growth rate of 22.6%. The highest contributor to the industry in the Asia-Pacific region, followed by Europe and North America. The Asia-Pacific market is expected to reach $357.81 billion by 2027 at a compound annual growth rate (CAGR) of 20.1% and North America is estimated to reach $194.2 billion by 2027.

As countries continue to move towards fuel-efficient and low-emission vehicles, the demand for EVs is only going to rise. Meanwhile, in tandem with the rise in market demand, technological advancements and government initiatives will boost the growth of EV makers in the coming years.

Nio’s battery as a service model holds an advantage here and it could attract users who are looking for low-cost EVs that promise high performance.

Exciting Model Lineup

Nio is launching the ET7 sedan this year which will be followed by the ET5 compact sedan. There is also speculation that we will see even more new vehicle models this year. There is a lot of excitement surrounding the ET7 and the car will enter the German market soon.

My InvestorPlace colleague David Moadel believes that the ET5 will spark Nio’s recovery.

The ET7 will be Nio’s first model that will be sold in Germany. The company’s ES8 SUV is already sold in neighboring Norway and might make its way to Germany soon as well.

Nio has seen high interest from several potential users, particularly in the European markets.

If the company introduces new models in the coming year, it will be able to attract a larger customer base and increase revenues. Nio has already entered the Norwegian market and it will soon plan to enter other European countries this year. The company has already doubled the production capacity at their plant in China to 240,000 vehicles a year. This will allow the company to reach its full potential and the margins are expected to pick up soon after.

The Bottom Line On NIO Stock

Besides the strong operating numbers and impressive deliveries, Nio is working towards the expansion of its market and this will push NIO stock higher. I believe Nio has the potential to beat the rivals with its product line and the battery as a service.

An HSBC analyst Yuqian Ding has raised their price target of NIO stock to $54 with a Buy rating after the company reported strong delivery numbers for December and announced new models at the NIO Day event. The analyst thinks that new models in this year could boost the volume growth.

Nio has already set the stage for 2022 and I believe it will report strong revenue numbers in the quarterly results. This will help NIO stock recover in the coming two months.

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.

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